Dollar pulls backs from payrolls-fueled surge

Hungarian forint plunges; Aussie fights China-spurred losses

WilliamL. Watts

LOS ANGELES (MarketWatch) — The dollar weakened versus most major rivals Monday as traders questioned whether a rally following strong U.S. jobs data at the end of last week was somewhat overdone.

The ICE dollar index
DXY, -0.01%
which measures the greenback against a basket of six other currencies, fell to 82.601, down from 82.900 in late North American trading Friday.

The WSJ dollar index
BUXX, +0.04%
which measures the greenback against a slightly wider basket, fell to 73.71 from Friday’s close at 73.80.

The dollar was still able to rise against the Japanese yen on Monday.

The dollar jumped Friday, with the creation of 236,000 jobs by the U.S. economy in February far surpassing expectations, with the unemployment rate dipping to 7.7%.

The dollar’s ability to rally on the back of positive economic news also cheered dollar bulls who contend the U.S. unit is poised to gain on expectations the Federal Reserve will move closer to scaling back its ultra-easy monetary policy.

But others urged caution.

“So while a 0.2% decline in the unemployment rate every month would take us down to the Fed’s 6.5% target in six months, the unemployment rate has also only fallen 0.1% since September 2012, and at that rate it will take five years to reach 6.5%,” wrote strategists at Lloyds Bank in London.

It is “hard to glean anything too conclusive from the numbers, and Friday’s move looks like a slight overreaction. So while we would not be aggressive dollar sellers, we would look for a correction to dollar strength from here, and 83 on the [ICE] dollar index is likely to prove difficult to break,” they said.

Dollar up vs. yen; Hungarian forint tumbles

Against the Japanese yen
USDJPY, +0.07%
the dollar fetched ¥96.30, up from ¥96.08 at the end of last week.

Reuters

The yen neared a four-year low vs. the dollar on Friday.

On Friday, the yen neared a four-year low against the dollar, and Crédit Agricole foreign-exchange strategist Adam Myers expects further yen weakness going forward. “There is no scope for Bank of Japan easing expectations to soften any time soon,” said Myers.

Specifically, the strategist cited comments from Prime Minister Shinzo Abe’s special adviser Koichi Hamada, who said a change to the central-bank law with respect to the nation’s current 2% inflation target should still be considered. Such a move could empower the government to push for a further loosening of policy.

“At the same time, he stressed that a strong Japanese yen can be corrected by monetary policy. Such comments suggest that there is no change to officials’ aggressive policy stance,” said Credit Agricole’s Myers.

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